What A Government Shutdown Means: "In the event of a government shutdown, functions of the federal government considered “non-essential” cease while “essential” functions continue," wrote Barclays' Michael Gapen and Michael Gavin this week. "Our economists estimate that for every week the government is shut down, real federal government consumption and gross investment falls 1.6% q/q saar and quarterly real GDP growth declines 0.1pp."

However, a shutdown would mean that much of the high-frequency, market-moving economic data we get won't be published. "All survey and other program operations will cease and the public website will not be updated," said Erica Groshen of the Bureau of Labor Statistics.

Economic Calendar

Chicago Purchasing Managers' Index (Monday): Economists estimate the Chicago PMI rose to a breakeven level of 50.0 from 48.2 in August. "This will mark the third consecutive increase in the Chicago PMI," wrote Bank of America Merrill Lynch's economics team. "Auto sales remain strong and dealers are reporting that low inventory levels are holding back sales. We expect auto makers to ramp up production to keep pace with the strong demand."

ISM Manufacturing (Tuesday): Economists estimate the ISM index slipped to 55.1 from 55.7 in August. "Regional manufacturing surveys released so far have been mixed," said Morgan Stanley's Ted Wieseman. "On an ISM-comparable basis, we estimate that the Empire State (52.4 v. 50.8) and Philly Fed (55.0 v. 48.8) strengthened in September, but the Richmond (49.9 v. 54.0) and Kansas City (51.4 v. 54.3) slowed."

Construction Spending (Tuesday): Economists estimate that construction spending climbed by 0.4% in August. "We anticipate another healthy rise in construction spending in August, with gains once again centered in the residential market," said Citi's Peter D'Antonio. "The construction series has been revised so heavily month-to-month lately that it makes sense to discount any headline reading until it is confirmed in the following month’s report."

Vehicle Sales (Tuesday): Analysts estimate that vehicle sales slowed to an annualized rate of 15.8 million in September, down from 16.0 million in August. "Data from the Senior Loan Officer Opinion Survey show that demand for auto loans is growing while banks are easing standards," said Wells Fargo's John Silvia. "Moreover, historically low interest rates on loans will continue to help affordability. The share of consumers planning to purchase an automobile over the next six months has been trending up, while dealer inventories remain well-managed relative to sales."

ADP Employment Change (Wednesday): Economists estimate the ADP survey will show payrolls increased by 176,000 in September. "Since Moody’s took over from Macroeconomic Advisors last October, the average absolute forecast miss between the initially reported ADP figure and the initially reported private payroll number from BLS is only 38k," said Deutsche Bank's Brett Ryan. "This is well within the range of monthly private payroll volatility and speaks to how good a predictor of payrolls ADP has been."

Initial Jobless Claims (Thursday): Economists estimate that initial claims climbed to 313,000 from 305,000 last week. "Last week, the Labor Department indicated that there were no special factors affecting the data, but we will wait to see if last week’s 305k level holds," said Deutsche Bank's Ryan.

Factory Orders (Thursday): Economists estimate that orders climbed by 0.2% in August. "Oil accounted for roughly 80% of the July increase in nondurable activity, and has a similar weight in our August forecast," noted Citi's D'Antonio. "Spot oil prices have been falling since early September, so this pattern is unlikely to be repeated in next month’s report."

ISM Non-Manufacturing Index (Thursday): Economists estimate the ISM services index fell to 57.0 from 58.6 in August. "We expect the non-manufacturing index to hold onto its August gains in September because the new orders component rose to its highest level since February 2011," said BAML's economists who are looking for a reading of 58.5.

Nonfarm Payrolls (Friday): Economists estimate U.S. companies added 180,000 jobs in September. "Fundamentally, the strong August ISM Non-Manufacturing Employment index, the strong August ISM Manufacturing and industrial production reports, and the drop in September initial jobless claims (even though some of it may be quirky) all point to stronger payroll growth," said the economics team at Credit Suisse. "Better signs for economic activity also suggest professional and business services, which include temps, may be due for a bounce."

Market Commentary

Investors are surprisingly sanguine considering the known unknowns.

"We estimate that little or no volatility premium for the debt ceiling debates is priced into the options markets on stocks most exposed to government spending cuts," said Goldman Sachs' Robert Boroujerdi.

"Complacency is even more pronounced on stocks with high government exposure," he added. "Fear priced into options on these stocks dropped over the past few months to new lows vs. SPX options."

And while the options markets suggest investors aren't worried about downside, there's also little to suggest investors are betting on upside.

"Investor apprehension about this market continues to increase," said JP Morgan's Tom Lee in reference to the latest leg of the stock market rally. "It is the combination of fears that this was a 'false breakout' to new highs coupled with lingering concerns about the budget/debt ceiling showdown in the US and the possible resulting turmoil."